Change of client

Labour & European Law ReviewWeekly Issue 38901 October 2014

There is a “service provision change” (SPC) under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) when one contractor stops providing activities for a client and a different contractor carries them on for the same client. In Horizon Security Services Ltd v Ndeze and PCS Group, the Employment Appeal Tribunal (EAT) held that there could not be an SPC as the client changed when the contract transferred.

Basic facts

Mr Ndeze worked as a security guard for PCS for 17 years at a site known as the Alpha Business Centre which was managed by Workspace plc but owned by the London Borough of Waltham Forest. Workspace told PCS on 7 January 2013 that the centre would be closing to make way for a supermarket. About two weeks later, the Council asked PCS for a quote to continue providing security services on the site, but ultimately gave the contract to another contractor, Horizon.

On 24 January PCS contacted Mr Ndeze to tell him that his job would transfer over to Horizon. However (rather confusingly) it also told him that he should go to the PCS office the next day so that he could be redeployed. When he did so, he was told by another PCS manager that his employment was now with Waltham Forest. He returned to the Alpha Business site where he was told his employment had not transferred to Horizon. He and his colleague were then replaced by two other security guards for the duration of the contract (about eight or nine months, while the old building was being demolished).

As of 25 January, therefore, Mr Ndeze had no job and no one prepared to admit responsibility for “that rather sad state of affairs”. He made a claim against PCS which applied to join Horizon to the proceedings. The tribunal had to decide whether there had been an SPC under TUPE.

Relevant law

Regulation 3 of TUPE states that there is an SPC when one contractor stops providing activities for a client, which are then carried on by a different contractor, if immediately before the SPC:

- there is an “organised grouping of employees whose main purpose is to carry out those activities” and- the client does not intend the activities to consist of a “single specific event or task of short-term duration”Case law has also established that the client must be the same before and after the transfer.

Tribunal decision

The tribunal held that there had been an SPC in that the “activities” carried out by PCS and Horizon were for the same client (the Council); that there had been an organised grouping of workers assigned to the transferred activities who were fundamentally or essentially the same; and the activities were not in connection with a single specific event or task of short-term duration.

EAT decision

The EAT allowed the appeal on two grounds. Firstly, PCS and Horizon had different clients - it was clear that PCS’s contract was with Workspace, not least because Workspace gave notice to PCS that its services would no longer be needed. PCS had also referred to their client as Workspace in their ET3. By contrast, Horizon’s contract was with the Council. There could not therefore be an SPC under regulation 3.

Secondly, there could not be an SPC where the client intends the activities to consist of a “single specific event or task of short-term duration”. In this case the client’s intention just before the changeover was for the security service to be carried on for a limited period of time pending the demolition of the premises, but the EAT thought that it might be relevant to have regard to the previous PCS contracts and contrast that with the duration of the Horizon contract. As such it was not certain that the Horizon contract was “short term”. In light of the finding that there was no TUPE transfer however it was not necessary to refer this back to the tribunal for a determination.

Comment

In the case of Costain v Armitage and ERH Communications Limited, the same judge suggested that costs may not always follow the event in circumstances where an appeal has not been “actively resisted” or a party is caught up in the appeal regardless of their position in respect of it, such as a TUPE claim where an employee is only party to an appeal because the “transferor” and “transferee” have contested a finding that there has been a TUPE transfer.